June 15, 2026 www.paloalto.gov/budget
1 ADOPTION OF
FY 2027
OPERATING & CAPITAL BUDGETS,
MUNICIPAL FEE SCHEDULE, &
APPROPRIATION LIMITS
Item #3
2 Order of Proceedings
1. Staff presentation of the FY 2027 Budget
2. One round of technical questions from City Council, excluding Attachment C
3. Public Comments
4. Recusals
5. Council discusses and approves items in Attachment C
6. Those recused from Attachment C rejoin
7. Council discuss and approve the remaining FY 2027 Budget
CITY COUNCIL FY 2027 BUDGET ADOPTION OVERVIEW
Tonight’s meeting concludes the FY 2027 budget process
• Summary of Finance Committee deliberations
• Review final balancing actions
• Other actions in annual process
GOAL: Adopt the FY 2027 Operating & Capital Budgets and Municipal Fee Schedule and other actions above.
3 www.paloalto.gov/budget
BUDGET CONVERSATIONS & CALENDAR
4 MAY 4 MAY 5 & 6 MAY 11 MAY 19 JUNE 15
Finance Committee
Budget Workshops:
Review the proposed
budgets and recommend
amendment(s)
Study Session City Council:
Finance Committee check-
in with the City Council
City Council: FY 2026
Proposed Budget Overview:
Discuss guidance for Finance
Committee colleagues
City Council Budget
Adoption:
Adopt Operating & Capital
budgets (as amended by
the Finance Committee)
Finance Committee Budget Wrap-up:
Based on the input from the May
budget meetings, recommend final
adjustment(s) to proposed budgets
for Council adoption
FY 2027 Budget Summary
5 • Citywide Operating budget totals $1.04 billion
• Capital budget totals $316.8 million in FY 2027 and $1.2 billion over the five-year CIP General Fund Reserves
• Budget Stabilization Reserve (BSR) ~ $53.7 million projected FY 2027 balance (17.2% of expenses) Staffing Levels: Net elimination of 21.25 Full-time FTE or 1.9% decrease from the FY 2027 Budget (Citywide) FY 2024
Actuals
FY 2025
Actuals
FY 2026
ADOPTED
FY 2027
ADOPTED
GF Revenue $278.3 $290.9 $301.2 $312.0
GF Expense $281.1 $302.2 $313.0 $311.8
GF Full-time Staffing
Citywide FT Staffing
586
1,063
603
1,092
614
1,110
593
1,089
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6 FY 2027 Finance Committee Recommendations
(General Fund Uses or Expenses)
Dept Description FY 2027
Revenue
FY 2027
Expense
FY 2027 Net
Revenue/(Expense)
FY 2028 Ongoing
/ (Savings)
CSD
JMZ Conservation Costs and explore utilizing existing
conservation programs to fulfill the AZA requirements to the extent possible | Reduce Hourly Positions $- $(64,000) $64,000 $(64,000) POL School Crossing Guards | Contingent upon 50% match from PAUSD 51,250 102,500 (51,250) TBD
POL Track Watch | Contingent upon 50% match from PAUSD 307,715 615,430 (307,715) TBD NON
OSV – Geng Road parking site from Sept-June ($200k) and additional towing capacity to include ($184k) for
enforcement and street sweeping - 384,000 (384,000) TBD NON Non-Profit Work Plan – Option C - 124,000 (124,000) TBD PWD
Adjust Canopy contract with total reduction of $15,000
instead of $43,550 and direct staff to communicate with Canopy regarding scope reductions
- 28,550 (28,550) 28,550
OOT 1.0 FTE Assistant Engineer – Office of Transportation (leveraging $150k OSV Reappropriations from FY 2026) 38,646 38,646 - TBD OOT Quiet Zone – accelerate design to FY 2027 and construction to FY 2028 - 1,000,000 (1,000,000) N/A
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7 Dept Description FY 2027
Revenue
FY 2027
Expense
FY 2027 Net
Revenue/(Expense)
FY
2028 Ongoing
/ (Savings)
NON TOT Revenue Increase and Increase of CIP Transfer $542,000 $542,000 $- N/A NON General Fund Base Transfer to CIP Decrease - (460,059) 460,059 N/A NON Use of Measure K | Affordable Housing - (384,000) 384,000 N/A NON Use of Measure K | Transportation - (1,000,000) 1,000,000 N/A NON Technical Adjustments (net aggregated to balance) - 12,544 (12,544) N/A Total 939,611 939,611
FY 2027 Finance Committee Recommendations
(General Fund Uses or Expenses)
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With the $312.0 million General Fund budget, the BSR is maintained at $53.7 million (17.2%), within the 15-20% target. A favorable sales tax adjustment may add $2.0 million, raising it to $55.7 million (17.9%). 8 Long Range Forecast & Budget Stabilization Reserve
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Line Item FY 2027
Forecast
FY 2028
Forecast
FY 2029*
Forecast
Revenue $312.0 $318.7 $329.2
Expenses 311.8 322.7 331.1
Transfers (Measure K) 0.2 (2.3) 1.3
Projected Net Surplus / (Deficit) 0 (1.7) (3.2)
*FY2029 does not reflect fiscal impact of bi-annual OPEB actuarial fluctuation, which staff roughly estimates an additional $2 million of expense appropriation.
While these actions successfully balance the total $312.0 million General Fund budget for FY 2027, they introduce an ongoing risk of approximately $1.41 million to $2.31 million in annual deficit exposure starting in FY 2028 – related to PAUSD cost sharing assumption.
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OTHER FUNDS
FY 2026 Adopted FY 2027 Adopted
Electric 6% 4.5%**
Gas 12%* 9% **
Water 10% 8%
Wastewater Collection 20% 16%
Refuse 0% 3%
Stormwater 2% 3%
Monthly Bill Amount $441.50 $476.70
Monthly Bill Change 9%*
$37.80
8%
$35.20
Additional actions
included in the
Budget address non-
General Fund
activities including
but not limited to:
• Utility rate
changes to the
right
*Rates reflect rate change update in February 2026 due Cost of Service Analysis (COSA). **On 4/21 Finance Committee recommendation Electric from 6.0% to 4.5%, Gas split 2:1 vote 10 Capital, Table of Organization & Municipal Fees
> Capital Funding
• Authorize $142.1 million in reappropriations to continue capital projects in FY 2027.
> Table of Organization
• Office of Transportation: Add a 1.00 FTE Assistant Engineer to support the implementation of street safety and oversized vehicle programs, with future year funding TBD.
• Community Services Department: Reduce the addition of a part-time temporary 0.48 FTE Zoological Assistant.
• Citywide staffing level of 1,089.10 FTE in FY 2027.
> Municipal Fees
• Adopt the FY 2027 Proposed Municipal Fee Schedule, which incorporates updates to existing fees and previously
approved fee actions
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11 Other Actions
> OPEB
• Accept the June 30, 2025 actuarial valuation and fund the annual Actuarially Determined Contribution (ADC) for Fiscal Years 2027 and 2028, with the FY 2027 budget including an ADC of $26.1 million.
> MOU with Palo Alto Museum – Roth Building
• Authorize the City Manager to negotiate and execute an MOU and Funding Agreement with the Palo Alto Museum to provide cost sharing for repairs to the basement and waterproofing in the Roth Building and improvements to Heritage Park drainage. > Appropriations Limit
• Adopt a Resolution determining the statutory Fiscal Year 2027 Appropriations Limit of $246.8 million with $168.21 million in net budgeted appropriations subject to the limit.
> Receive Support Letter from the Planning & Transportation Commission
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www.paloalto.gov/budget 11
12 DRAFT MOTION FOR CITY COUNCIL CONSIDERATION
1) Adopt the Fiscal Year 2027 Budget Ordinance which includes the Operating and Capital Budgets, Table of Organization, and Municipal Fee Schedule, as amended by the actions outlined in this report;
2) Accept the FY 2027-2031 Capital Improvement Program (CIP) as amended by the actions outlined in this report;
3) Adopt a Resolution determining the Appropriations Limit for Fiscal Year 2027; 4) Accept the June 30, 2025 actuarial valuation of Palo Alto's Retiree Healthcare Plan and fund the annual Actuarially Determine Contribution (ADC) for Fiscal Year 2027 and 2028, and
5) Authorize the City Manager or their designee to negotiate and execute a Memorandum of Understanding and Funding Agreement (or Lease Agreement Amendment) with the Palo Alto Museum to provide cost sharing for repairs to the basement and waterproofing in the Roth Building and improvements to Heritage Park drainage. www.paloalto.gov/budget
13 Order of Proceedings
1. Staff presentation of the FY 2027 Budget
2. One round of technical questions from City Council, excluding Attachment C
3. Public Comments
4. Recusal
5. Council discusses and approves items in Attachment C
6. Those recused from Attachment C rejoin
7. Council discuss and approve the remaining FY 2027 Budget
14 Order of Proceedings
1. Staff presentation of the FY 2027 Budget
2. One round of technical questions from City Council, excluding Attachment C
3. Public Comments
4. Recusals
5. Council discusses and approves items in Attachment C
6. Those recused from Attachment C rejoin
7. Council discuss and approve the remaining FY 2027 Budget
15 Order of Proceedings
1. Staff presentation of the FY 2027 Budget
2. One round of technical questions from City Council, excluding Attachment C
3. Public Comments
4. Recusals
5. Council discusses and approves items in Attachment C
6. Those recused from Attachment C rejoin
7. Council discuss and approve the remaining FY 2027 Budget